Trump admin eyes CFTC to lead digital asset regulation

The incoming Trump administration wants to expand the Commodity Futures Trading Commission's authority by giving it oversight of a significant portion of the $3 trillion digital asset market, FOX Business has learned.

The move comes as President-elect Donald Trump and the Republican majority in Congress seek to roll back some of the regulatory powers the Securities and Exchange Commission has exercised over the digital asset industry under President Biden and the outgoing SEC chairman. It will be part of a broader effort by the sect. , Gary Gensler.

The CFTC, often referred to as the SEC's “little sister,” is tasked by Congress with overseeing the $20 trillion U.S. derivatives market, which includes futures, options, and trading in physical commodities such as gold, oil, and wheat. Like the SEC, the CFTC has the authority to establish market rules and bring enforcement actions, but the derivatives market is dominated by sophisticated institutional investors rather than small investors, and therefore requires less regulatory touch. is often considered lighter than the SEC. Improve your risk management capabilities.

With President Trump's inauguration and the growing influence of the cryptocurrency industry in Republican politics, the CFTC's role will soon shift to the spot market for digital assets considered commodities, such as Bitcoin and Ethereum, and the exchanges that facilitate their trading. This could extend to regulation. According to a source with direct knowledge of the Trump team's thinking. More than 50 million people own digital assets, but key figures in the incoming Trump administration are pushing ahead with new technology, including potentially transformative blockchain technology that eliminates costly intermediaries in commercial transactions. We believe that less stringent regulations are needed to foster innovation in the cryptocurrency business.

Former CFTC Chairman Chris Giancarlo told FOX Business: “With the right funding and the right leadership, I think the CFTC could really start regulating digital products from President Donald Trump's first day in office.'' ” he said.

Giving the CFTC the power to regulate the spot market for Bitcoin, Ethereum, and other tokens considered digital goods would also give it the power to regulate the exchanges on which those assets are traded. Currently, there is no regulatory body with clear jurisdiction over these spot market transactions, so this move is an important step toward providing regulatory clarity for companies and individuals involved in trading the two largest cryptocurrencies by market capitalization. Probably.

Republican presidential candidate and former President Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, on July 27, 2024. (Kevin Wurm/Reuters/Reuters Photo)

The uncertainty surrounding the classification of digital assets and the reluctance of the SEC or CFTC to create specific rules has led both agencies to regulate this area through enforcement actions. Under Mr. Gensler, the SEC led a three-year industry-wide crackdown to reinforce his view that most cryptocurrencies other than Bitcoin are securities, and both he and the SEC It became largely unpopular in the currency industry, leading to support for the CFTC as the primary currency. regulator.

There was no immediate comment from the SEC.

Giancarlo, also known as the “Father of Cryptocurrency,” served as the CFTC Chairman during the Trump administration's first term, and is currently being considered for the role of “Cryptocurrency Emperor” in the new administration, but this is currently not the case. It's a vague new position, and one that will help carry it out. If President Trump delegates the role of leading a group of crypto advisors on digital asset businesses, it could have an impact on crypto policy.

Chris Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), speaks at the DC FinTech Week event in Washington, DC on November 8, 2023. (Ting Sheng/Bloomberg via Getty Images/Getty Images)

He has long called for his former agency to play a greater role in regulating digital coins. In 2022, Giancarlo wrote a letter to the Senate Agriculture Committee, which oversees the CFTC, in support of the CFTC having spot authority for cryptocurrencies, and for digital assets dating back to 2015, when Bitcoin was considered a commodity. emphasized early involvement. Under Giancarlo, the CFTC approved futures trading in the price of Bitcoin.

Trump's former CFTC chairman focuses on role as 'crypto czar'

Biden's outgoing CFTC Chairman Rostin Behnum asked the Agriculture Committee during an oversight hearing in July for additional funding to begin regulating the cryptocurrency market more effectively than enforcement. Benham said that about 50% of the agency's enforcement actions this year have been brought against crypto businesses, a “staggering statistic” for an agency that does not have the power to regulate the industry.

The additional funding, which will ultimately need to be approved by Congress, will be critical as the CFTC begins cracking down on fraud and regulation in the cryptocurrency spot market. The agency's operating budget in 2024 is less than one-fifth that of the SEC's, at $400 million compared to $2.4 billion, and it has a staff of about 700 compared to the SEC's 5,300.

While the idea that the CFTC would play a larger role in regulating digital products is welcome for the crypto industry, many traditional CFTC voters believe that giving the CFTC unprecedented powers over certain spot markets would There are concerns that this will have a ripple effect on the regulation of trade and commodity trading. Agricultural products are under the jurisdiction of other agencies such as the Department of Agriculture. Giancarlo said any new law giving the CFTC spot authority over digital products should address these concerns with specific language.

SEC Chairman Gary Gensler to resign in January

Commodity Futures Trading Commission (CFTC), Washington, DC, August 30, 2020. (Andrew Kelly/Reuters/Reuters Photo)

President Trump's plan to grant the CFTC increased oversight of cryptocurrencies is a broader move that would rebuild the relationship between the two major financial regulators and encourage them to cooperate on specific crypto policies, such as enforcing stablecoin regulations. It's part of our mission. Trump also wants to overhaul the SEC's culture after spending three years under Gensler. Mr. Gensler's far-reaching rulemaking agenda and progressive leanings have resulted in the resignation of many senior officials and a constant confrontation with Mr. Trump from disgruntled employee unions.

“We have a lot of work to do at the SEC,” said Giancarlo, who replaced Gensler. “Many of our top talents have left the building, so I'm committed to getting the SEC back to work and refocusing its mission on the agenda of driving innovation.” There is a need,” he said. In 2017, he became the CFTC Chairman. Giancarlo had previously been considered a potential candidate to replace Gensler as SEC chairman under the next administration, but he made it clear to the Trump transition team that he had no intention of doing so. “Clean up the mess left by Gary Gensler once again.”

SEC Chairman Gary Gensler attends a meeting of the U.S. Treasury Department's Financial Stability Oversight Council in Washington, DC on July 28, 2023. (Kevin Dietsch/Getty Images/Getty Images)

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It is unclear who President Trump will nominate next to lead the SEC, but being pro-cryptocurrency is not the only quality being considered, according to people close to the transition team. Beyond cryptocurrencies, the SEC is responsible for overseeing the $100 trillion securities market, which includes stocks, bonds, mutual funds, government bonds, and more.

“The SEC has great bones, but whoever leads it next will need good policy insight and good management skills to return the SEC to a contributing part of the government's agenda,” Jean said. Carlo said.